The Essential Guide to Year-End Financial Planning

The end of the year is an ideal time to review your financial portfolio and set the stage for achieving your long-term objectives.

Your finances deserve the same attention you give to other major life priorities. Spending focused time at year-end allows you to protect what you’ve built and make the most of future growth opportunities.

The decisions you make now can impact your tax liability, investment returns, generational wealth transfer, and long-term wealth preservation. Use this guide as a planning tool to achieve long-term success.

Optimize Your Tax Strategy

Your tax situation should be top of mind at year-end. Taking proactive steps now can reduce your tax burden and maximize after-tax wealth.

Fully fund tax-advantaged accounts

Maximizing contributions to tax-advantaged accounts is one of the most straightforward ways to reduce your taxable income and spur long-term growth. Review your 401(k), IRA, HSA, and other tax-deferred accounts to ensure you’re contributing the maximum allowed. For 2025, 401(k) limits are $23,500 ($31,000 if you’re 50 or older). The annual limits for IRA contributions are $7,000 for most people, and $8,000 for people 50 or older.

Relatively small increases in 401(k) contributions can lead to big long-term growth and tax savings. Let’s say a 50-year-old investor in the 24 percent tax bracket increases his 401(k) contributions from $20,000 to the 2025 maximum of $31,000. That extra investment of $11,000 would reduce his federal income tax by $2,640 annually. Over 15 years, this could add up to $39,600 in total federal tax savings, not counting investment growth on the additional contributions.

More importantly, assuming a hypothetical 6 percent annual return, maximizing contributions would have resulted in an account balance of approximately $726,000 compared to $468,000 with the lower contribution. That’s a difference of $258,000. This doesn’t even account for potential employer matching on the higher contributions or state tax savings.

Maximize tax-loss harvesting

Tax-loss harvesting deserves special attention at year-end. Review your portfolio for positions currently trading below your purchase price. Selling these investments can generate capital losses that offset capital gains. You can use excess losses to offset up to $3,000 of ordinary income each year.

Accelerate or defer income

Strategically timing your income and deductible expenses throughout the year can lower your overall tax burden. Depending on your situation, you might want to receive more income this year or push it to next year. The same goes for deductible expenses.

The timing of when you receive a bonus, exercise a stock option, make a charitable contribution, or incur a business expense can meaningfully lower your taxes. This is particularly valuable if you anticipate being in a lower tax bracket next year due to retirement, a career change, or other factors.

Assess capital gains impact

Capital gains management can impact your tax bill, too. You’ll want to identify significant unrealized gains, if any, and evaluate whether realizing them this year or deferring them to future years makes sense based on your current tax bracket and anticipated future income.

Manage state tax obligations

Most of our clients live in Maryland, North Carolina, and Virginia, which have state taxes. In 2025, Maryland and Virginia levy a progressive state income tax ranging from 2 percent to 5.75 percent, with some variations. North Carolina has a flat income tax rate of 4.25 percent.

The most effective tactic to reduce state income taxes is to itemize deductions and take advantage of credits for retirement investments, education, and homeownership.

High-income earners in these states may also be able to use several credits, including the Research and Development Expenses Tax Credit and the Business Investment and Development Credit. Programs, eligibility, and investor benefits will vary by state.

Review Retirement Plans

It’s important to review your retirement plan withdrawal and contribution strategies to ensure you minimize taxes and comply with IRS requirements.

Take required minimum distributions (RMDs)

As mandated by the IRS, a Required Minimum Distribution (RMD) is the minimum amount investors must withdraw annually from their tax-deferred retirement accounts in their 70s, depending on the year they were born.

The penalty for missing an RMD is a hefty 25 percent of the amount you should have withdrawn. This penalty drops to 10 percent if you correct the mistake within two years.

Required distributions are based on your account balance as of December 31 of the previous year and are divided by a life expectancy factor created by the IRS. If you have multiple retirement accounts, you can take the total RMD from one or more accounts, but you must calculate the requirement for each account separately.

Maximize retirement contributions

Maxing out retirement contributions can provide immediate tax benefits. In 2025, you can contribute up to $23,500 to your 401(k) annually. Investors 50 and older can make an additional $7,500 in catch-up contributions, while those ages 60 to 63 may be eligible for a higher “super catch-up” of $11,250.

Note that the rules for additional contributions are different for traditional IRAs, 401(k)s, 403 (b)s, Roth IRAs, and SIMPLE IRAs.

Review withdrawal strategy

If you’re retired, verify that your current monthly withdrawal amount meets your living expenses and keeps pace with inflation. Review whether your portfolio’s performance this year can continue to support your withdrawal rate. A typical guideline is four percent annually, but yours may vary.

Some families may need to increase their withdrawals to pay for new healthcare or health insurance costs. However, raising withdrawals during market downturns can deplete your portfolio faster.

Protect and Optimize Your Estate Plan

Your estate plan also deserves regular attention. Life changes, assets grow and decline, and the tax laws—witness the tax act of 2025—can necessitate updates to your estate documents.

Evaluate wills and trusts

When was the last time you reviewed your will and trust documents? The best time is now if your assets have grown, you’ve gotten married, divorced, or had a baby. Make sure your papers reflect your current wishes regarding asset distribution. Check all accounts to confirm that your legal documents say what you want them to say.

Check your powers of attorney

Are your powers of attorney for finances and healthcare up to date? These powers ensure someone you trust can make decisions on your behalf if you become incapacitated. Verify that the people you’ve designated are still the right ones and that they want to continue serving in the roles you asked them to. If you don’t have appropriate powers of attorney, why not set that straight before the end of the year?

Implement strategic gifting

Do your current gifting strategies make sense as much now as they did one year ago? The annual gift tax exclusion allows individuals to give up to $19,000 per recipient in 2025 without filing a gift tax return. The gift tax exclusion is twice as much for married couples.

Families often provide gifts through direct cash transfers, contributions to 529 college savings plans, payments of medical or educational expenses, funding custodial accounts for minor children, or by establishing trusts. Many families prefer to gift appreciated stock to family members in lower tax brackets.

Explore advanced planning techniques

Do you have specialized estate planning tools, such as family limited partnerships, irrevocable life insurance trusts, and grantor retained annuity trusts, that need to be reviewed? Or do you need any of these planning techniques that you don’t have now?

Family limited partnership. A family limited partnership lets you give shares in your business or investments to your children while you remain in charge of running the business. You transfer ownership gradually while retaining control over decisions.

Irrevocable life insurance trust. An irrevocable life insurance trust keeps your life insurance money out of your taxable estate. When you die, the insurance payout goes directly to heirs without being taxed as part of your estate.

Grantor retained annuity trust. This trust allows you to give away assets that have grown in value to your children or other loved ones. At the same time, you receive regular payments from the trust. A benefit is that the IRS  calculates the taxable gift based on the asset’s value when you set up the trust, not its higher value when your heirs receive it.[MH1] [WM2]

Optimize Charitable and Philanthropic Planning

Year-end charitable contributions can generate tax benefits for you and your family. These need to be reviewed as well.

Donate appreciated securities

Instead of selling appreciated stocks or mutual funds and paying capital gains taxes, consider donating them directly to qualified charities. You avoid the capital gains tax entirely and can deduct the full fair market value of the securities if they have been held for more than a year.

For example, if you purchased stock for $10,000 that’s now worth $50,000, donating it allows you to deduct $50,000 while avoiding tax on the $40,000 gain. This strategy is a more tax-efficient approach than selling and donating cash.

Establish or put more money into a Donor-Advised Fund

Do you have a donor-advised fund (DAF), or should you evaluate whether you need one? A DAF is where you contribute cash or appreciated assets and get an immediate tax deduction. Over time, even years later, you can decide which charity or charities to support. This strategy is particularly valuable in years when you are making a high income and want the tax deduction now, but prefer to distribute donations in the future.

Historically, the higher a family’s income, the more likely they are to use DAFs as a charitable investment vehicle. More than half of households with a net worth of more than $5 million have or plan to establish one within the next three years.

Magnify charitable contributions

Qualified charitable distributions from your IRA are another powerful year-end strategy. If you’re 70½ or older, you can contribute up to $108,000 each year from your IRA directly to qualified charities. This can help you reduce your required minimum distributions. If you itemize deductions, charitable contributions from long-term appreciated securities or cash, can reduce your taxable income[MH3] [WM4] . Cash donations to qualified organizations are deductible up to 60 percent of your adjusted gross income.

Review Your Investment Portfolio

Market movements throughout the year can shift your portfolio away from your target allocation. Year-end may be a great time to rebalance.

Evaluate portfolio performance

Review your portfolio’s performance relative to your long-term goals, not short-term market fluctuations. Compare your returns against relevant benchmarks and assess whether your investment strategy is meeting expectations.

Review investment expenses

Investment fees and expenses can make a major contribution, positive or negative, to your portfolio’s long-term returns. Examine your investment expenses carefully. High fees compound negatively over time, reducing your returns. Review expense ratios, advisory fees, and transaction costs for mutual funds.

Frequently Asked Questions About Year-end Financial Planning

What’s the single most important year-end financial task for investors?

Reviewing your tax situation should be high on your list. The tax code provides opportunities for investors to reduce their tax burden, but many strategies must be implemented before December 31. You’ll want to identify income deferral opportunities, maximize deductions, and execute tax-loss harvesting.

Should I be concerned about asset allocation?

The markets move up, down, and sideways. That’s what markets do. Market movements throughout the year can shift portfolios away from intended allocations. An annual review ensures your asset allocation aligns with your financial goals, risk tolerance, and time horizon.

What’s the most overlooked year-end action for investors?

Many people forget to update beneficiaries after getting married, divorced, or having a baby. Some people say they will do this later, but don’t get around to it. Without a proper update, your money and property could potentially go to an ex-spouse or someone you no longer intend. Make sure to review beneficiaries yearly so your assets can go to the right people or organizations without legal complications.

Get Your Paperwork in Order

Paperwork is often a forgotten stepchild of the year-end planning process. Gather your tax documents,  W-2s, 1099s, mortgage interest statements, property tax records, and documentation of deductible expenses. If you’ve made estimated tax payments throughout the year, verify that you’ve met the required thresholds to avoid penalties.

Ensure your important documents are organized and accessible. Your executor and family members should know where to find your will, trust documents, and account information.

Your Year-End Financial Planning Checklist: An Investor’s Guide

Year-end presents unique opportunities to optimize your financial strategy before the calendar turns.

By taking proactive steps now for tax planning, estate management, charitable giving, and portfolio positioning, you can reduce your tax burden, build and protect your estate and legacy, and maximize returns. The decisions you make at the end of the year can have lasting impacts on your wealth.

As your wealth management partner, we look to guide, clarify, and empower you every step of the way. Ready to get started? We are here to help.

Schedule a complimentary year-end financial planning discussion to review potential strategies that fit your investment objectives.

This content should not be construed as specific investment, tax, legal, or accounting advice.